Midwest Producers Covering Variable Costs

Strong milk prices in the Midwest are allowing dairy farmers to cover variable costs, but still are not high enough to cover all costs, according to budgets developed by Nebraska Extension specialist Robert Tigner. “Feed costs did not fall as much as anticipated so fixed costs, including labor and management, were not covered,” he says.

The Midwest milk price is right at $22—high by historic standards. A negative 60¢/cwt producer price differential also did not help.

Midwest producers, when the costs of raising replacements are included, are still several dollars below covering the cost of labor and management, says Tigner. “Milk sales for tiestall barns need to be in the 26,000 pounds per cow range to meet all costs,” he says.

Tigner’s monthly analysis is based on $7.63/bu corn, $450/ton soybean meal and $293/ton alfalfa prices. “It appears that feed costs won’t be dropping significantly any time in the future,” he says.